August 9, 2021

“The dollar has held its gains from last Friday’s strong payrolls reading, which boosted market confidence. With labour market recovery previously cited as a condition of tighter monetary policy, the data reinforced bets that stimulus tapering could start this year and higher interest rates could follow as soon as 2022.”

Sam Cornford, Partner & Head of Trading

Main Headlines

The US $550 billion infrastructure package cleared its final serious Senate hurdle Sunday night, after a drawn-out debate pushed the final passage of the legislation into this week. Several proposed amendments to the infrastructure legislation – including one sought by industry to alter language in the bill imposing new tax rules on cryptocurrency transactions – were left in limbo with no immediate path to a vote unless all 100 senators agree. Once the infrastructure bill gets a vote, Schumer plans to turn quickly to passing a budget resolution that will set the stage for Democrats to pass the remainder of President Biden’s economic agenda.

Senior Conservative MPs have warned Boris Johnson not to move against Rishi Sunak following weekend reports that the UK prime minister had threatened to demote his chancellor. Tensions between the two most senior figures in the UK government have risen over clashes on spending and taxation. Johnson is eager to spend more on the NHS and his ‘levelling up’ agenda, whereas Sunak is concerned about rising inflation and interest rates and wants to keep spending in check given that the UK’s £2.2tn debt is at its highest since the early 1960s.

GBP

Sterling is higher against most major currencies this morning. One in 10 London offices could become unusable in two years unless landlords invest heavily to bring them up to new environmental standards, a leading property agency has warned. Meanwhile, A national enterprise strategy is being drawn up by officials to encourage small businesses and entrepreneurs and will be unveiled later this year. UK business secretary Kwasi Kwarteng has vowed to put a free market approach at the heart of the post-Covid recovery, as the economy is weaned off the massive state support it received during the pandemic.

EUR

The euro is lower against the pound and unchanged against the dollar overnight. European Central Bank Governing Council member Jens Weidmann warned that inflation in the euro area could pick up faster than expected, and urged not to drag out the institution’s pandemic bond-buying program. The EU is likely to discuss reintroducing travel restrictions on visitors from the US next week as coronavirus case numbers rise again. The US has breached the threshold to be included among non-EU countries that enjoy unrestricted travel into the bloc.

USD

The dollar is lower against the pound and unchanged against the euro in the early morning trade. Anthony Fauci, America’s top infectious-disease doctor, said on Sunday that he is “strongly in favour” of speeding booster shots to people with weakened immune systems, a further sign of how the delta variant continues to shift the strategies for curbing the pandemic. Elsewhere, Nasdaq-listed companies will be required to have diverse boards after a divided Securities and Exchange Commission approved the US stock exchange’s unprecedented proposal.

Markets

Shares rose in Hong Kong and China and fluctuated in South Korea. Japanese markets are closed for a holiday. In a brief selloff at the start of Asia trading, gold touched the lowest since March before paring losses. Silver dropped to its lowest since November. The prospect of higher rates makes precious metals less attractive relative to other assets. Crude oil extended last week’s decline – its worst since October – on concern the delta virus strain will hamper demand growth. The U.S. 10-year Treasury yield was steady in early London trading after climbing to about 1.3% Friday. Chinese bond yields gained after inflation data came in above expectations.

Main Economic Data/Central Banks/Government (All Times CET)

7:45 a.m.: Switzerland July unemployment

8:00 a.m.: Germany June trade Balance

8:00 a.m.: Norway June industrial output

10:30 a.m.: Euro-area Aug. Sentix Investor Confidence

11:30 a.m.: Germany sells bills

12:00 p.m.: Sweden unemployment

2:50 p.m.: France sells bills

France Business Industry Sentiment Indicator

Corporate Events

Earnings include BioNTech, Hargreaves Lansdown, Air Products, Barrick Gold, Trade Desk, Nutrien, Tyson Foods

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